At January 1, 2016, Hilly Mountain Flagpoles had Accounts Receivable of $31,000, and Allowance for Bad Debts had a credit balance of $3,000. During the year, Hilly Mountain Flagpoles recorded the following:
a. Sales of $174,000 ($157,000 on account; $17,000 for cash). Ignore Cost of Goods Sold.
b. Collections on account, $131,000.
c. Write-offs of uncollectible receivables, $2,200.
1. Journalize Hilly’s transactions that occurred during 2016. The company uses the allowance method.
2. Post Hilly’s transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts.
3. Journalize Hilly’s adjustment to record bad debts expense assuming Hilly estimates bad debts as 3% of accounts receivable. Post the adjustment to the appropriate T-accounts.
4. Show how Hilly Mountain Flagpoles will report net accounts receivable on its December 31, 2016, balance sheet.